Successfully reported this slideshow.
Your SlideShare is downloading. ×

BUDGETING SOLUTION

Ad
Ad
Ad
Ad
Ad
Ad
Ad
Ad
Ad
Ad
Ad
Loading in …3
×

Check these out next

1 of 6 Ad

More Related Content

Recently uploaded (20)

Advertisement

BUDGETING SOLUTION

  1. 1. NX0474 Seminar 7 Budgeting
  2. 2. SALES BUDGET MADAKI PLC Sales Budget January February March April Forecast sales (units) 2,250 2,050 1,650 2,050 Planned selling price of £220 per unit 495,000 451,000 363,000 451,000 SP x SU £220 x 2,250 Units
  3. 3. PRODUCTION BUDGETS MADAKI PLC PRODUCTION BUDGET IN UNITS December January February March April Required sales (units) 2,250 2,050 1,650 2,050 Add required closing stock 675 615 495 615 375 2,865 2,545 2,265 2,425 Less opening stock (675.00) (615.00) (495.00) (615.00) Production requirement 2,190 1,930 1,770 1,810 30% next month sales NOTE: The closing stock policy is to ensure that the company has enough production to cover demands from customers in the early days of the following month, when production is still ongoing. The closing stock becomes opening stock in the following month.
  4. 4. MADAKI PLC RAW MATERIALS PURCHASES BUDGET MATERIAL B (kg) December January February March April kg kg kg kg kg Required as per production budget 6,570 5,790 5,310 5,430 Add required closing stock 2957 2,606 2,390 2,444 2,012 9,176 8,180 7,754 7,442 Less opening inventory (2,957) (2,606) (2,390) (2,444) Required material purchases 6,219 5,574 5,364 4,998 Budget value @ £7 per kg 43,533 39,018 37,548 34,986 RAW MATERIAL PURCHASES BUDGET 45% of next month usage 3kg per production unit
  5. 5. LABOUR COST BUDGET MADAKI PLC LABOUR COST BUDGET January February March April Required production units 2,190 1,930 1,770 1,810 Grade 1 @ 4 hours per unit (hrs) 8,760 7,720 7,080 7,240 Grade 1 @ £15 per hour (£) 131,400 115,800 106,200 108,600 Grade 2 @ 6 hours per unit (hrs) 13,140 11,580 10,620 10,860 Grade 2 @ £9 per hour (£) 118,260 104,220 95,580 97,740 Total budgeted labour cost (£) 249,660 220,020 201,780 206,340
  6. 6. MATERIAL - A IN SHORT SUPPLY • If material A is in short supply, the company would need to obtain an alternative source of supply, a find a substitute material. • If unable to do both, they would need to use limiting factor analysis to determine the optimum output level for the available material. • In this situation, sales will not be the limiting factor and the production budget will become the key budget factor in the budget preparation process.

×